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Dive Brief:

The D.C. Office of People's Counsel (OPC), the residential ratepayer advocate for the District of Columbia, and the D.C. Office of Attorney General have filed with the city's Public Service Commission for reconsideration of the acquisition of local utility Pepco by Chicago-based Exelon.

In a release Friday, Sandra Mattavous-Frye, head of OPC, asked regulators to either reopen the merger record and allow all parties a chance to comment or reject the merger on the grounds that its final request for approval was prodecurally improper. Attorney General Karl Racine in his filing said the regulatory decision violates the "due process rights" of parties to the deal.

The filings come on the heels of similar requests from merger opponents. Thje Grid 2.0 Working Group, a coalition of smart grid and clean energy advocates, filed with the PSC days after the merger approval in March, and DC Solar United Neighborhoods (SUN) and DC Public Power, a group pushing public utility ownership, filed in the weeks after.

The PSC has 30 days from April 22 to decide whether it will reconsider, and the order approving the merger is stayed until that time.

Dive Insight:

When D.C. utility regulators approved the Exelon-Pepco merger last month, the decision came at the end of a long and convoluted process.

After the PSC unanimously rejected Exelon's initial merger application last year, the company hammered out a settlement deal with the D.C. mayor and other stakeholders, hoping to secure approval on appeal.

Regulators rejected the settlement in February, outlining three changes to the deal they said would result in automatic approval if all the parties agreed to them. However, OPC, the Attorney General and the mayor objected, saying the changes gutted vital protections for residential ratepayers.

With automatic approval off the table, Exelon filed with the commission again, asking regulators to approve the settlement — with the three proposed changes — on its merits, instead of as a part of the automatic deal.

On March 23, regulators took Exelon up on its offer, voting 2-1 to approve the settlement agreement with the three changes they laid out the month before. Approving the deal, even without the support of OPC and the mayor, was preferable to the city missing out on millions of dollars in promised benefits from Exelon, Commissioner Willie Phillips told Utility Dive at the time.

Now, OPC and the Attorney General are calling foul on that play-by-play, saying the approval process was illegal under laws governing the commission.

“I strongly believe that the manner in which the decision was reached was legally flawed," Mattavous-Frye said in a statement. "If the flaws in this order are not corrected, it will erode the trust and confidence of consumers and all parties that practice before this commission."

The Attorney General struck a similar tone in his comments, saying that regulators violated the due process rights of parties to the settlement agreement by approving changes to the deal not supported by them.

The decision, Racine wrote, "will have a chilling effect on future settlement negotiations because parties will fear that, in agreeing to proposed settlement terms, they run the risk of the Commission proposing and approving alternative settlement terms without the parties’ consent."

The comments from Raine and Mattavous-Frye echo those of the Grid 2.0 Working Group, which filed for reconsideration of the merger on March 28.

In its filing, the group said the merger review process "began with procedural flaws and culminated in disagreements between Commissioners about the standard under which it should evaluate the [settlement agreement]."

Upon reconsideration, the group said, the PSC should find that the record does not support the commission's finding that the merger is in the public interest.

"It should also," the filing said, "find that the many procedural defects in the process leading to [merger approval], specifically the decision to proceed on a compressed schedule at the behest of [Exelon and Pepco], ran afoul of explicit statutory notice requirements to which this proceeding is subject."

Pepco spokesman Vincent Morris said that the company will respond to the filings from OPC and merger opponents, but that it is ready to move on.

"We will respond to filing asking for reconsideration by the PSC," Morris wrote in an email. "However, we believe that after two years of exhaustive consideration, public input and discussion, the Commission’s actions and ruling were appropriate, reasonable and based on serving the public interest. We have closed the merger and have moved forward as one company."

The deadline for filing requests for reconsideration on the merger approval was April 22. Regulators have 30 days from that date to either approve the applications for reconsideration or allow the merger to stand. The order approving the acquisition is stayed until that decision.